Negative Effects Hinder to saving Prevent long term economic growth Saving (Y-T-C) (T-G) Private saving Public saving <0
Hinder to saving Prevent long term economic growth Saving : S I (Y = = (Y-T-C) (T + (T-G) = Private saving + Public saving < 0
Market for loanable funds Interest Rate QQ Loanable funds (s billions) Total investment decrease Crowding Out Effect
S1 Interest S2 Rate r’ r D1 Q Loanable Funds ’ Q Total investment decrease, ($billions) Q Q Crowding Out Effect